How does whole life insurance differ from term life insurance?

Whole life insurance is characterized by its combination of a death benefit and a savings component, known as cash value. The cash value accumulates over time as you pay premiums, which can be borrowed against or withdrawn, providing financial flexibility. This feature distinguishes whole life insurance from term life insurance, which is strictly a policy for a predetermined period offering a death benefit without any cash value component.

In contrast to whole life insurance, term life insurance typically provides coverage for a specified term—such as 10, 20, or 30 years—and pays out only if the insured passes away during that term. Once the term expires, coverage ceases, and there is no cash value accumulated. Thus, the significant difference in cash value accumulation is the core reason why the correct response highlights this aspect of whole life insurance.